2022 Indiana Venture Report

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Venture Report INDIANA | 2022
2 ELEVATEVENTURES.COM Table of Contents Overview National Venture Capital Trends Regional Venture Capital Community Venture Capital Investments in Indiana Distribution of Deals by Type, Size and Sector Distribution of Deals by Region Indiana Deal Value and Deal Count Conclusion and Elevate Activity 3 4 6 7 10 11 8 9

Overview

The 2022 Indiana Venture Report is a year-end assessment of venture investment activities in Indiana. The report starts with a general look at the national venture capital trends, followed by an analysis of venture capital activity in the Great Lakes states of Illinois, Indiana, Michigan, Minnesota, Ohio, and Wisconsin. Finally, venture capital activity in Indiana is compared across different sectors, firms, stages, and Indiana regions.

The number of deals across a number of investments and stages continued to grow in 2022. The investment total reached an impressive $1.09 billion but fell short of the historic total of $1.4 billion in 2021. This continued deal growth is led by an increase in the business-to-business and advanced manufacturing sectors over the previous year.

PitchBook Data Inc., a database of private capital markets including venture capital (VC), private equity (PE), and mergers & acquisitions (M&A) transactions, was the primary source of investment information used to develop this report. This database was used alongside Elevate Ventures’ proprietary deal information and secondary data collected from Elevate Ventures’ key coinvestment partners.

3 VENTURE REPORT 2022
THE DEVELOPMENT
THE INDIANA VENTURE
THANK YOU TO THE ELEVATE VENTURES PARTNERS WHO CONTRIBUTED TO
OF
REPORT.

National Venture Capital Trends

U.S. INVESTMENT AND EXIT ACTIVITY DECLINED FROM 2021’S RECORD HIGHS

The pandemic created a profitable, albeit brief, environment for the VC industry. Deal counts and dollars invested hit all-time highs in 2021, and the world of VC was ripe with experimentation in different business models across almost all sectors. Now, in a post-pandemic world, decision-makers in both public and private sectors have had to allocate resources to meet new challenges. The result, in the short term, has been a reduction in market activity from the highs seen in 2021.

The rampant inflation that has driven the federal funds rate to multidecade highs has had a significant effect on the VC industry. Previously, low interest rates had made it difficult to generate returns in more traditional asset classes, and the returns that VC funds have given to their Limited Partners had made

VC an attractive asset class. As interest rates rise, it is likely that increased asset diversification will result in moving assets away from VC.

According to Pitchbook’s Q4 2022 Venture Monitor, U.S. VC-backed companies raised $248.3 billion in 2022. This is a significant drop (nearly 31%) from the previous year’s total of $344.7 billion. Investment activity (measured in both total dollars invested and total deal count) for seed and angel, early-stage, and late-stage deals decreased in both investment total and estimated number of deals. Four consecutive quarters of decline in both investment total and number of deals could foreshadow continued regression in 2023 should the economic downturn continue. However, if compared to any year prior to 2021, overall investment activity is still very high.

VENTURE CAPITAL ACTIVITY - U.S. (BILLIONS)

4 ELEVATEVENTURES.COM
CALIFORNIA MASSACHUSETTS NEW YORK ALL OTHERS GREAT LAKES & MIDWEST
$350 B $300 B $250 B $200 B $150 B $100 B $50 B 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Sources: PitchBook Data Inc., Elevate Ventures Proprietary Data and Contributing Partners (see page 3).

At the seed stage, deal sizes and pre-money valuations grew when compared to 2021 figures. This can mostly be attributed to a growing number of actively investing “micro-funds” and participation from nontraditional and crossover investors. These nontraditional investors are beginning to slow their participation in VC in favor of more attractive, lowerrisk investments, given the overall economic climate change in the second half of 2022.

Exit activity declined significantly in 2022; only $71.4 billion in total exit value was generated – the first time this figure has been below $100 billion in the last six years. Additionally, public exits of VC-backed companies have become almost nonexistent, with only 14 public listings in Q4. This steep drop off in public exits clearly demonstrates

the effect of rising interest rates on the institutional investor. Acquisition activity also declined, with Q4 seeing only $763 million in total acquisition deal value, the first time a quarterly acquisition total dipped below $1 billion in more than a decade. This downward trend is expected to continue into 2023 as fears of a global recession remain relevant.

From a VC market share standpoint, California, Massachusetts, and New York continue to make up the overwhelming majority. These three states accounted for over 63% of all venture dollars invested in the U.S. The Great Lakes region, fueled by strong VC growth in Minnesota, accounted for 7.2% of all venture dollars invested in the U.S. in 2022. Indiana maintained its share of national VC activity at 0.4%.

VENTURE CAPITAL INVESTED IN 2022 IN THE U.S.

Sources: PitchBook Data Inc., Elevate Ventures Proprietary Data and Contributing Partners (see page 3).

Note: “Venture capital deals” include only seed round, early-stage and later-stage VC deals, based on the deal type reported by PitchBook Data Inc.

5 VENTURE REPORT 2022 42.7% 8.7% 12.1% 29.3%
CALIFORNIA MASSACHUSETTS NEW YORK ALL OTHERS GREAT LAKES & MIDWEST Illinois 4.2% Indiana 0.4% Michigan 0.5% Ohio 0.9% Wisconsin 0.2% 7.2% Minnesota 0.9%

Regional Venture Capital Community

GREAT LAKES REGION BUCKED THE NATIONAL DOWNWARD TREND AND CLOSED MORE VC DEALS

Indiana’s deal count through 2022 was strong, with 190 deals reported, outperforming the 2021 total of 159. Several states in the Great Lakes region experienced growth both in number of deals and in dollars invested in 2022. Michigan, Minnesota, and Ohio all greatly outpaced their respective 2021 figures.

Indiana was the fourth most active state in the Great Lakes region, but it finished with the fifth most dollars invested in the region in 2022. Indiana had 50 later-stage VC deals in 2022 — nearly three times more than 2021 — further solidifying the maturation of the Indiana venture ecosystem as the state continues to produce highly attractive investment targets.

VC DOLLARS

BY STATE - 2022 YE

Sources: PitchBook Data Inc., Elevate Ventures Proprietary Data and Contributing Partners (see page 3).

*Note: The “VC Deal Count by State” chart does not include any debt financing deals in the total of seed, early-stage, and later-stage VC deals represented.

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VC DEAL COUNT BY STATE
YE 450 400 350 300 250 200 150 100 50 0 SEED EARLY-STAGE LATER-STAGE National Average Illinois Indiana Michigan Minnesota Ohio Wisconsin 150 50 72 74 71 38 96 125 42 60 50 60 19 93 138 98 62 54 63 35 106 LaterStage EarlyStage Seed
$12 M $10 M $8 M $6 M $4 M $2 M 0 SEED EARLY-STAGE LATER-STAGE National Average Illinois Indiana Michigan Minnesota Ohio Wisconsin Dollars Invested (Millions)
-2022
INVESTED

Venture Capital Investments in Indiana

RECORD-SETTING DEAL COUNT AND A RISE IN LATER-STAGE INVESTMENTS

The Indiana venture ecosystem experienced consistent growth over the past decade. 2020 and 2021 were each record years for deal count and dollars invested. A similar deal count was recorded in 2021, while total dollars invested tripled when compared to 2019 and 2020. 2022’s record deal count of 190, eclipsed the previous record of 160 deals in 2020. For the second consecutive year, Indiana eclipsed the $1 billion mark for dollars invested, but the yearly investment total did not equal the record of $1.4 billion set in 2021.

Indiana continues to see primarily small, earlier-stage deals. However, Indiana saw more later-stage VC deals in 2022 than any year prior.

7 VENTURE REPORT 2022
Sources: PitchBook Data Inc., Elevate Ventures Proprietary Data and Contributing Partners (see page 3). INDIANA HISTORICAL VC DOLLARS & DEALS $1.5 B $1.0 B $0.5 B 0 Dollars Invested 200 150 100 50 0 CAPITAL INVESTED DEAL COUNT Number of Deals 2011 2020 2021 2019 2018 2017 2016 2015 2014 2013 2012 Number of Deals Dollars Invested (Millions) 2022 $193 $164 $91 $183 $180.5 $157 $182 $257 $530 $498 $1,427.4 $1,088.6 41 32 39 55 51 59 81 95 134 160 159 190

Distribution of Deals by Type, Size and Sector

DISTRIBUTION BY SECTOR

B2B tech remains a top sector for venture activities in Indiana, pulling in over $663 million in 2022. The life sciences sector saw continued momentum in 2022 as well, with the total deal size in this sector growing by almost 10% compared to 2021.

DISTRIBUTION BY SIZE

Sources: PitchBook Data Inc., Elevate Ventures Proprietary Data and Contributing Partners (see page 3).

Note: there is an increasing number of cross-sector venture opportunities. Our categorization is based only on the primary sector. Healthcare IT, for instance, is categorized under B2B or B2C tech as primary sector, with secondary sector in life sciences.

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DEAL SIZE DEAL COUNT % OF DEAL COUNT UNKNOWN/ UNDISCLOSED 24 12.63% BELOW $500K 52 27.37% $500K-$0.99M 18 9.47% $1M-$4.99M 63 33.16% $5M-$9.99M 10 5.26% $10M+ 23 12.11% TOTAL 190 100%
SECTOR DEAL COUNT DEAL SIZE ADVANCED MANUFACTURING 8 $51.8M B2B 129 $663.8M B2C 27 $27.6M LIFE SCIENCES/ AG SCIENCES 26 $345.5M TOTAL 190 $1.1B
DEAL TYPE DEAL COUNT DEAL SIZE EARLY-STAGE VC 42 $395M LATER-STAGE VC 50 $568M SEED ROUND 98 $125M GRAND TOTAL 190 $1.1B
DISTRIBUTION BY DEAL TYPE

Distribution of Deals by Region

CENTRAL AND WEST CENTRAL INDIANA LEAD IN VC ACTIVITY

Central Indiana continues to make up most of the state’s venture capital activities. In 2022, the region generated 63% of all venture deals, representing 65% of dollars invested. Compared to other regions in the state, Central Indiana’s venture ecosystem benefits from its large size, growing talent pool, and presence of entrepreneurs who have previously had successful exits. The West Central region surrounding Purdue University’s main campus has seen greatly expanded deal value; it was responsible for more than 21% of Indiana’s total deal value in 2022.

Grand Total: 190 Deals $1.1 Billion

9 VENTURE REPORT 2022 NORTHWEST NORTH CENTRAL NORTHEAST HEARTLAND WEST CENTRAL CENTRAL NORTHEAST CENTRAL EAST CENTRAL SOUTHEAST SOUTH CENTRAL SOUTH WEST SOUTHWEST $100K $44.1M $23.6M 232.4M $711.3M $12.7M $1.7M
Sources: PitchBook Data Inc., Elevate Ventures Proprietary Data and Contributing Partners (see page 3). 3 15 5 14 120 16 5 $3.6M 2 $47M 1 $300K 1 $10.6M 5 $1.3M 3

Indiana Deal Value and Deal Count

Central: 65.34%

West Central: 21.35%

Heartland: 4.32%

North Central: 4.05%

Northeast: 2.17%

South Central: 1.17%

South: 0.97%

East Central: 0.33%

Southwest: 0.15%

West: 0.12%

Northeast Central: 0.02%

Northwest: 0.01%

Southeast: 0.00%

Central: 63.16%

West Central: 7.37%

Heartland: 0.53%

North Central: 7.89%

Northeast: 2.63%

South Central: 8.42%

South: 2.63%

East Central: 1.05%

Southwest: 2.63%

West: 1.58%

Northeast Central: 0.53%

Northwest: 1.58%

Southeast: 0.00%

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DEAL
DEAL
%
INDIANA REGION
VALUE % INDIANA REGION
COUNT

Conclusion

Indiana venture activity saw a slowdown in 2022, but it was still a prosperous year. Total deal count hit a new record in 2022, and for the second time in history, total investment eclipsed $1 billion. However, investors are becoming more cautious as high inflation and interest rates make VC investments less attractive. Indiana’s venture ecosystem matured considerably in 2022, and the state is well-equipped to maintain its strong pipeline of companies and growing network of support in 2023.

Elevate Ventures’ Activity

DESPITE THE PREVAILING ECONOMIC CONDITIONS, ELEVATE VENTURES HAD A RECORD-BREAKING YEAR

Elevate completed 128 deals and funded $22.8 million to Indiana startups in 2022. This is a 3.22% increase in the number of deals funded and a 34.75% increase in dollars invested year-over-year from the previous record in 2021.

Elevate’s total investment since inception reached $152.3 million in 2022, including 507 companies. These investments have resulted in a total of over $2 billion in co-investment for these Indiana companies. Elevate has been recognized by Pitchbook as the Most Active VC in the Great Lakes region since 2017.

People and communities have experienced Elevate’s impact throughout the state. More than 4,000 companies across 86 counties have engaged with and benefited from Elevate’s resources and networks since 2011. Additionally, Elevate’s portfolio companies boast 3,305 employees, an average salary of $81,000, and an annual payroll of approximately $267 million.

4,000 86 3,305 128 $22.8M Companies Impacted Indiana Counties Portfolio Employees

$81K Average Salary Deals in 2022 Funded in 2022

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CONTACT ELEVATE VENTURES 50 E 91st Street, Suite 213 Indianapolis, IN 46240 (317) 975-1901 ElevateVentures.com
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